Abbott plans to spin off nutrition unit that generates $8.5 billion in annual sales

Abbott $ABT said it intends to separate its nutrition business into an independent, publicly traded company, with completion expected by the end of 2027.

The new company would have about $8.5 billion in annual sales, about 16,000 employees and 14 manufacturing sites, Abbott said. Its brands would include Similac, PediaSure, Pedialyte, Glucerna and Ensure. Abbott plans to distribute stock in the new company to its shareholders, who would own stock in both companies after the separation. The transaction is intended to be tax-free for U.S. federal income tax purposes.

"This separation will benefit both companies," Abbott Chairman and CEO Robert B. Ford $F said in a statement. Ford said the nutrition business can direct its resources more effectively as an independent company, while Abbott's medical devices, diagnostics and established medicines operations have strong growth opportunities.

Daniel Salvadori, an Abbott executive vice president who is also group president of established pharmaceuticals and nutritional products, will take over as CEO of the new nutrition company.

After the separation, Abbott will have sales of about $42 billion and about 106,000 employees, the company said. Abbott expects the combined dividend from the two companies to equal its dividend at the time of separation.

The separation will leave Abbott's 2026 guidance unchanged, as well as the 2027 guidance it plans to give in January, the company said. Abbott expects one-time charges before the separation and will quantify them at a later date. The nutrition business will remain part of Abbott during the process.

The deal remains subject to regulatory approvals, the effectiveness of a registration statement on Form 10 and final approval by Abbott's board.

Abbott stock slid 4% in Wednesday's premarket session. It had lost over 18% of its value between January and Tuesday's close. Abbott will discuss the transaction on its third-quarter earnings call at 9 a.m. ET on Wednesday.

Abbott agreed in August to pay $670 million to resolve about 2,000 claims tied to its specialty formulas for premature infants. The claims alleged the formulas caused necrotizing enterocolitis, a bowel disease. Abbott denied wrongdoing.

Abbott's nutrition operations have been beset by repeated trouble over the past several years, according to Bloomberg. They include product recalls in 2022 that left infant formula in short supply across the country. Abbott last month reached a $385 million settlement resolving U.S. claims of substandard manufacturing at two of its facilities, according to Bloomberg.

Nutrition was the one weak spot in Abbott's second-quarter results, with sales down 3.1% on a reported basis.